 Income tax 2022-2023 standard deduction. Let's do some wealth preservation with some tax preparation. Most of this information comes from the Form 1040 Instructions Tax Year 2022 line instructions you can find at the IRS website, irs.gov, irs.gov. If we're looking at the income tax formula, we're down here at... Yeah, maybe I'll file a federal income tax return. The standard deduction, which you might call the below-the-line deduction, as opposed to the above-the-line deduction, the adjustments to income. Let's just do a quick recap of the income tax equation here, the first half in essence being an income statement, because it's an income tax. Although it's a strange income statement, remembering when we think about the income statement, income is basically bad. Everything that's flipped on its head for taxes, and the expenses, called deductions in this case, are basically good. The second half of the income tax equation will be calculating the income tax, applying any other taxes like self-employment tax, for example. Employable or very employable? Applying credits and payments in order to get to the refund or the amount due, we're focused here still on the top half of the equation in essence, the income statement. So income statement is in essence income minus expenses or income minus deductions, but we have a couple steps along the way before we get to the net income or taxable income. IRS code allows us to deduct from your taxable income. Support accounting instruction by clicking the link below, giving you a free month membership to all of the content on our website, broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. We've got income minus the adjustments to income, the above the line deductions we saw in a prior presentation gets us to the adjusted gross income or AGI. And then we take the greater of the standard deduction our focus now or the itemized deductions. We'll talk about itemized deductions later. Now our focus is on the standard deduction. Now also note that a few years back they increased the level of the standard deductions, the amounts of the standard deduction, which I believe was an attempt to make the tax code a little bit easier. So a quick recap on why they might do that or the thought process of that would be if you were to make the tax code easier. You might say, hey, look, let's just get rid of the itemized deductions, for example, and try to flatten out possibly the tax rates so that it's easier to actually calculate the tax. Those are usually the thought processes that come into place. And the reason for that would be if you think about an income tax, the natural type of expenses for an income tax would be those expenses that you needed to expand in order to generate the income. So if you had two businesses, for example, and one of the businesses had a lot more expenses that they need to expand in order to generate the revenue, you wouldn't really want to tax both those businesses on their gross income, the top line. But on the net income, because one business had to consume a lot more in order to generate the revenue. Now, in our income tax system, a lot of people are W2 employees, which means that you don't have a lot of deductions with relation to your job because the assumption is that they're handled by the employer. But you can see that when you talk about a schedule C, for example, the general rule being if it's a deduction if you had to consume it in order to generate the revenue. And then the tax code puts all of this other stuff in place. Like we're going to give you a deduction to save for retirement or something like that. We're going to give you a deduction because we want to incentivize homes. We want to give you a deduction of the state taxes for whatever reason. We want to give you a deduction in order to incentivize charitable deductions and whatnot. So people give to charity. These could all be good causes, but you can also see how they can complicate the code. And they often tend to, as complicated code, more laws typically do benefit more wealthy individuals. The more complex the code is, the more kind of nuanced the deductions are, and the more the deductions you could get if you had the cash flow to do whatever the law says to do. Usually that's going to benefit the higher income individuals. So oftentimes there's kind of a move to flatten things out to try to lower the itemized deductions from time to time and then try to possibly flatten out the progressive tax rates so that it's easier to calculate. And then once you do that, then it gets bloated back up again. So right now more people are taking the standard deduction than they were before. And then I would suspect in the future, depending on what happens in politics that will see bloating in the tax code that will either make the itemized deductions more relevant in the future, or they'll start putting deductions elsewhere, like on the first page of the 1040 or in the adjustments to income or something like that. But that's where we are now. So here's where the standard deduction is on the first page of the Form 1040. You've got basically your deductions on the left-hand side listed out. So if you're single filer versus married filing, joint versus head of household and so on, those are the general rules. We'll take a look at some examples of them in a future presentation in tax software and tax forms. So standard deduction tip. So if you are filing Form 1040 SR, you can find a standard deduction chart at the last page of that form that can calculate the amount of your standard deduction in most situations. Obviously, tax software is often a useful kind of component. Notice that there's a couple of variations to the standard deduction. It's kind of in that box on the first page of the Form 1040. But then if you're over a certain age, then there could be an adjustment to the standard deduction. And if you're blind, there could be some other adjustments to the standard deduction, which are often related to the Form 1040 SR. But again, we'll dive into that when we get into the example problems. Single and married filing jointly. If you or your spouse, if you are married and filing a joint return, can be claimed as a dependent on someone else's return, check the appropriate box and the standard deduction section. If you were a dual status alien, check the spouse itemizes on a separate return or were a dual status alien box. So these are a couple check boxes up top if you can be claimed by a dependent, if someone else can claim you. And then we've got this dual status alien, which is again kind of more of an unusual situation. So if you were a dual status alien and you file a joint return with your spouse, who was a U.S. citizen or resident alien at the end of 2022, and you and your spouse agree to be taxed on your combined worldwide income, don't check the box. So we've got the age blindness. So if you or your spouse, if you are married and filing a joint return were born before January 2, 1958, or were blind at the end of 2022, check the appropriate boxes on the line labeled age slash blindness. So the reason that's here with the standard deduction is because the standard deduction will be dependent upon the filing status, single married filing joint, head of household qualified widow, widower. And then again, you could have an adjustment to those standard deductions amounts based on an age or blindness, which could increase those amounts as well. So remember from filing status, these perspectives, I would usually think of the people that are married or the people that are unmarried. If you're unmarried, you can either file single or head of household depend whether and single would be the worst. So you try to file head of household if you can, but you would need a dependent in order to do so. And the standard deductions will be lowest for single, a little bit higher for head of household. You would think the standard deduction would be doubled for married filing joint, which it is. And then married filing separate, you would think it would kind of bounce back to the single area. But remember, married filing separate is not exactly the same as a single. So just be careful with that. So don't check any boxes for your spouse if your filing status is head of household. So death of spouse in 2022. So what if a spouse dies in 2022, the current tax year? If your spouse was born before January 2, 1958, but died in 2022 before reaching age 65, don't check the box that says spouse was born before January 2, 1958. So we've got these kind of unusual situations where we have a death and then this cutoff situation. A person is considered to reach age 65 on the day before the person's 65th birthday. Example, your spouse was born on February 14, 1957 and died on February 13, 2022. Your spouse is considered age 65 at the time of death. Check the appropriate box for your spouse. However, if your spouse died on February 12, 2022, your spouse isn't considered age 65. Don't check the box. So death of taxpayer in 2022. If you are preparing a return for someone who died in 2022, you can see publication 501 before completing the standard deduction information. Blindness plus, if you weren't totally blind as of December 31, 2022, you must get a statement certified by your eye doctor, ophthalmologist, or optomistrist. So in other words, if you have the standard deduction and then you're trying to up the standard deduction because you're claiming that you're blind, then obviously if you're not fully blind, then there could become a question, are you legally blind or are you blind enough in terms of whatever the rate is for claiming the deduction? Which means you've got to get certification here from someone for that. So you can't see better than 2200 and your better eye with glasses or contact lenses or your field of vision is 20 degrees or less. So if your eye condition isn't likely to improve beyond the conditions listed above, you can get a statement certified by your eye doctor, ophthalmologist, or optometrist to this effect instead. So if you must keep the statement for your record, so obviously you're not going to attach the statement typically to your tax return, but if the IRS came back within an audit and said, hey, we need documentation because you said you were blind here and whatnot, then you'd have to be able to provide that like with any other kind of documentation in that event, the event of an audit. So you can download or view online tax forms and publications in a variety of formats including text only, Braille, ready files, browser friendly, HTML. So then of course the IRS is trying to get their documentation in a format to accommodate different individuals with different needs including blind individuals or people with visually impairments. So if you receive a notice or letter, but you would prefer to have a Braille or large print, you can use Form 9000 alternative media preference to request notices in an alternative format. So you can get your notices in another format in that case. Married filing separately. If your filing status is married filing separately and your spouse itemizes deductions on their return, check the spouse itemizes on a separate return or you were a dual status alien box. So now you've got a situation where if you're married, you have the option of filing married filing joint which would be the standard option, which means that the standard deduction you would think would basically be double what it would for a single filer. But then what if you file married filing separately? If you file married filing separately, you would think that the standard deduction would basically bounce back to what it would be if you filed single, which is often the case if you would have filed basically as a standard deduction if filed married filing joint. But if you're in a situation where one of the spouses would itemize, why would they itemize? Because their itemized deductions are greater than the standard deduction, then the IRS is going to be wary of a situation where people are going to try to split filing separately just for tax benefits. Having one person take the greater itemized deduction and the other still getting the standard deduction. So you've got to let the IRS know that if one spouse took the itemized deduction that may limit the other spouse from taking the standard deduction on the other side when you're filing two returns instead of one married filing separate returns instead of one married filing joint return. So if your filing status is married filing separately and your spouse was born before January 2, 1958 or was blind at the end of 2022, you can check the appropriate boxes on the line labeled age blindness. If your spouse had no income isn't filing a return and can't be claimed as a dependent on another person's return.